Miles Says Bank of England Can Do More If U.K. Slump Persists

Bank of England Governor Mervyn King gave a gloomy assessment of the economy last week, saying gross domestic product may shrink in the current quarter and that the road to recovery will be “long and winding.” Photographer: Simon Dawson/Bloomberg

Nov. 19 (Bloomberg) -- Bank of England policy maker David
Miles said there is more the central bank can do to boost growth
if the recessionary conditions gripping the U.K. economy
persist.

“We may need more stimulus,” he said in an interview with
Sky News television yesterday. “That will depend on how the
headwinds holding back growth play out.” The bank’s Funding for
Lending Scheme “will have some positive impact as we go into
next year, but if it turns out that not enough has been done,
that the economy’s going to stay in a recessionary state and
that’s going to drive inflation down, there is more we can do.
We have not run out of ammunition,” he said.

Bank of England Governor Mervyn King gave a gloomy
assessment of the economy last week, saying gross domestic
product may shrink in the current quarter and that the road to
recovery will be “long and winding.” He held out the prospect
of further asset purchases after the Monetary Policy Committee
voted this month to halt the program at 375 billion pounds ($596
billion.)

Miles said yesterday that pressure on wages had allowed
officials to keep monetary policy at this “very expansionary
setting” and cautioned against tightening conditions too
soon.”

“It would be a mistake to try and get back to more normal
monetary policy too quickly when the recovery that we’ve seen
has been pretty anemic,” he said.

He dismissed any prospect of a return to “more normal”
growth rates in the near term. “It may not be three, six months
but if you look beyond that, a year, 18 months, two years, I
would expect we’ll get back to more normal rates of growth.”

Triple-Dip

The economy emerged from a slump in the third quarter, and
with the euro-region debt crisis hanging over U.K. prospects
economists say the risk has increased that the country will
succumb to its first triple-dip recession since records began
almost six decades ago.

Miles said he expects the forces that have hobbled the
economy since the 2008 financial crisis to diminish. The squeeze
on personal incomes from rising commodity prices is coming to an
end, making him “guardedly optimistic” that consumer spending
will pick up, he said.